Isles face own fiscal cliff as many expect sizable drop-off in federal funds

When University of Hawaii engineering professor Panos Pre­ve­douros as­ked his students to examine the impact of various potential disasters on Oahu, two groups looked at a major tsunami, two focused on a severe hurricane, one dealt with the shutdown of the island's power grid from a massive electromagnetic pulse and another analyzed the shock from soaring oil prices.

Prevedouros gave a seventh group a different calamity to evaluate: the economic fallout from the possible retirement of U.S. Sen. Daniel Ino­uye.

That the late senator's departure from the nation's Capitol would be considered a disaster for the purposes of the UH class assignment reflects what many people in academic, government, business and other circles around the state contend:

Hawaii stands to lose a lot economically from Ino­uye's death this week.

As appropriations chairman for the Senate, the 88-year-old World War II veteran helped steer billions of dollars of federal money into Hawaii's economy. His seniority as the longest-serving member of the Senate also added to his influence in funding Hawaii projects and programs, helping create thousands of jobs over the years.

At a time when Congress is focusing on how to cut federal spending, losing a senator with such heft and replacing him with a new member lacking his clout and stature will result in lean years ahead, analysts and others say. One likened it to Hawaii's version of a fiscal cliff.

The outlook is exacerbated, they added, because Hawaii is losing many years of seniority with the imminent retirement of U.S. Sen. Daniel Akaka, leaving two rookie senators to look after Hawaii's interests in that body, even as senators from the 49 other states push for their own favored projects.

But it's the absence of Ino­uye, given his powerful position as the Senate's money chairman and his understated way of getting things done, that will have the most effect on the federal spending flow to the islands, according to local and Washington, D.C., observers.

"His shoes will be very tough to fill," said Steve Ellis, vice president of Taxpayers for Common Sense, a Washington-based government watchdog group. "Certainly, he casts a very long shadow."

"I'm sad to say that we're going to feel (the impact) in the years ahead," said Walter Dods, former First Hawaiian Bank chief executive officer and a longtime friend of Ino­uye. "Time will show us just how important Dan Ino­uye was to Hawaii."

INOUYE'S ABILITY to bring home the federal bacon — sometimes applauded, sometimes criticized — often was noted by his top rankings in recent years for securing earmarks, or pork, for Hawaii programs.

In fiscal year 2010, the last year Congress used earmarks, Hawaii received the most on a per-capita basis, and most if not all of that was due to Ino­uye, according to Ellis' group.

But once Congress stopped using earmarks, Ino­uye's ability to secure appropriations relative to other members of Congress actually may have increased, according to Jock Friedly, president and founder of Legi­Storm, another Washington-based watchdog group.

Earmarks essentially went underground, and projects sought by congressional members were funded by persuading the executive branch to include money in its budget proposals to Congress, Friedly said.

Inouye's requests likely received priority.

"You always listen to the appropriations chairman," Friedly said. "Anybody in Washington had to take his phone call."

Getting a phone call from a new Hawaii senator without a powerful chairmanship won't have the same effect, the analysts said.

"It's not like the federal government is going to forget about Hawaii entirely," added Ellis, who was born at Tripler Army Medical Center and spent a few years on Oahu, where his Navy father was stationed. "But it will be more on the margins, where (Hawaii) probably won't do quite as well."

Inouye is credited with helping steer funding to programs and projects in virtually every sector of Hawaii's economy, from the military and agriculture to education and health care.

The funding did not come just from earmarks. Millions more were included in budget items that have become integral parts of federal agency operations.

Dods said Inouye knew the day would come when he was no longer in Washington and worked hard to establish programs with long-lasting impact that would survive even after he was gone.

In 1995, for instance, Ino­uye helped establish the Waikiki-based Asia-Pacific Center for Security Studies, a Department of Defense institute that focuses on building cooperation between nations in the Pacific on security issues.

The institute employs about 130 faculty and support staff and has an annual budget of roughly $16 million, according to Mary Mar­ko­vi­no­vic, chief of public affairs for the organization.

Inouye, as one of the organization's founding fathers, was at the Waikiki campus in August for the ribbon-cutting marking the opening of a new 10,000-square-foot wing of classroom space.

Unlike some agencies that were funded through earmarks, the center gets its operating money through the regular DOD budget and expects to continue getting funding in the years ahead, remaining part of Ino­uye's legacy, Mar­­ko­vi­no­vic said.

"We're very much an established institute," she said.

Agencies and organizations that relied on Ino­uye's patronage for regular funding might not be in the same position because it likely will be harder to direct money to Hawaii, analysts said.

"In the overall jockeying for federal spending, particularly in this tough budget climate we're in, Hawaii will not be as well positioned to do that," Ellis said.

The six graduate students who worked on the two-month Ino­uye project for Pre­ve­douros' cl­ass focused on the senator's ability to secure earmarks and described him as a key economic player for the state.

They concluded that losing Ino­uye as a senator would equate to a loss of up to $450 million annually, or akin to losing the revenue and jobs of a company the size of Hawaiian Airlines, according to their November analysis and Pre­ve­dou­ros.

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You live on wasteful pork ...................you will learn to starve without it.

on December 19,2012 | 01:43PM

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realist3463wrote:

Since appropriations begin in the House of Representatives, maybe it is time to have a Republican in the House.

on December 19,2012 | 03:16AM

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benderwrote:

Are you kidding, there's already too many of them in the House of Representatives.

on December 19,2012 | 05:04AM

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awahanawrote:

Why I voted for Cayetano. Panos was part of the package!

on December 19,2012 | 04:19AM

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palaniwrote:

I'd like to see what percentage of these earmarks went to the Department of Defense, and how much was directed towards Hawaii infrastructure and other programs primarily benefiting our civilian population. The actual "loss" may be less than what the raw numbers suggest.

on December 19,2012 | 04:25AM

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soundofreasonwrote:

Agreed. It won't wipe out the existence of Pearl Harbor and our key military location for other military.

on December 19,2012 | 05:58AM

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Tony91wrote:

If anyone recall, Inouye saved the Honolulu Navy Shipyard from the chopping block a few years ago. That was worth a heck of a lot more than 450 million. The senator's passing will cost Hawaii billions. It will take 12-18 months for the impact to be felt, but it will be very, very noticeable.

on December 19,2012 | 09:12PM

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Bdpapawrote:

These DOD earmarks went to a lot of the rebulding of military housing. These earmarks created a lot of work and the ability for the military to make our service people and their family comfortable. These military families spend a lot of money in the local communities which bring in more money to our tax coffers and support our businesses.

on December 19,2012 | 06:03AM

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lee1957wrote:

The rebuilding of military housing is/was funded by a private venture, not DoD earmarks.

on December 19,2012 | 06:41AM

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Bdpapawrote:

I always thought the government paid for everything. Guess I am wrong.

on December 19,2012 | 09:49AM

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frontmanwrote:

IT WAS TAXPAYER MONEY.......................Not private investors.

on December 19,2012 | 04:21PM

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alliewrote:

True...but the article needs to mention the millions of dollars that annually went to race-based programs like the Hawaiian Education act. Some here were worried that there was not real accountability for these funds and no out come assessment. As long as Dan could get them, it delayed any sort of accountability for these funds. Now, they may go away. In addition, USA is broke.

on December 19,2012 | 11:14AM

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Mythmanwrote:

Allie, read Morton v Mancari and the opinion in Rice and stop slandering native Hawaiians of the HHCA by saying they are a race.

on December 19,2012 | 11:34AM

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soundofreasonwrote:

So, yeah Neil - let's go ahead with increasing our State spending by 19% like your budget does. THAT'LL work out just fine.

on December 19,2012 | 05:56AM

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McCullywrote:

There will be less federal money for this state, so folks prepare for the worst.

on December 19,2012 | 06:07AM

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Maneki_Nekowrote:

So we get the Crazy Train money but lose the other Federal money? Is this being considered in those super rosy economic forecasts that Abercromiibe is using to justify more spending? Another thing: if overall Federal spending is going to take a hit, is the Crazy Train the best use of the funds? Are the other projects less of a priority?

on December 19,2012 | 07:22AM

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HD36wrote:

There should be lots of money to go around. Ben Bernacke is printing $40 billion dollars a month to loan to the Federal Government by buying long term US Treasuries. I just hope the money has at least 50% of its purchasing power down the road.

on December 19,2012 | 08:27AM

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localguywrote:

While sorry to hear of his passing, this is the best financial even to ever happen in the Nei. Finally we get off the Dole and will get serious about our financial status. Yes it may be hard at first but in the end it will be good for everyone. Fraud and waste will go down, we can reduce or position as the state with the most government employees per taxpayer, saving big time in retirement and other areas. Fiscal responsibility will rule the Nei. NOT!!! We will continue wasting taxpayer's money, bureaucrats will fund their pet projects, taxes will raise as King Neil wastes more taxpayer money. We do what we do best, fail.

on December 19,2012 | 08:53AM

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falsewrote:

It's all Bushes fault that Inouye died. Yeah, yeah...Bush cut funding on stem cell research. We could have grown Inouye a spine.

on December 19,2012 | 10:33AM

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Mythmanwrote:

you are hilarious, False - you wouldn't be Andy Bumatai would you?

on December 19,2012 | 11:35AM

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Bumbywrote:

Bottom line is that the financial bottom line of funds coming in from the federal government will be less. What percentage needs to be followed closely over the next 2 to 3 years. In the meantime the Hawaii government need to start thinking of tightening the budget to prepare for any drop in funds. Beginning in the 4th year we will see how the flow will be and what needs to be done by our leaders in Washington and here in Hawaii. Lesson to learn is that for the future of Hawaii, let us never have 2 senators or 2 congress people of the same old age. When 2 are over 65 to 70, one needs to step aside and groom another younger person.

on December 19,2012 | 11:20AM

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foliefoliewrote:

That's exactly what Ed Case said. Someone younger should have been groomed earlier. Since Akaka was not as powerful as Inouye, Akaka should have stepped down earlier. Unfortunately, there are many people in Hawaii that don't want to admit that Ed Case was right. Now look where we are today because we didn't plan for the future.

on December 19,2012 | 11:50PM

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Mythmanwrote:

A better use for the location, instead of the Waikiki-based Asia-Pacific Center for Security Studies, would be as the site of the President Barrack H. Obama PRESIDENTIAL LIBRARY, as a lasting memorial to Dan Inouye.

on December 19,2012 | 11:32AM

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Anonymouswrote:

Going over the cliff is a good analogy for Hawaii - that's what sheep do.
Hawaii is going over the cliff and most are too dense to recognize the fact, let alone the why.

on December 19,2012 | 11:41AM

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loquaciousonewrote:

Don’t Blindly Follow Lemurs
http://www.morevisibility.com/semblog/dont-blindly-follow-lemurs.html
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April 28th, 2010 by Katherine Bennett
Tags: company, Keywords, marketing-online, websites
Remember hearing the story about lemurs? Every year around a certain time they jump off a cliff. However, one would think that at least one lemur would look over the cliff and say, “Hmm, I don’t think I’m going to follow the crowd in jumping off the cliff.” It seems like it would be common sense, yet it happens in the world of online marketing time after time. The rule of thumb to remember when marketing online is that following the crowd isn’t always the best option, especially when it comes to keywords and websites.

on December 19,2012 | 11:58AM

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Maneki_Nekowrote:

I think the animal you are thinking of is Lemmings. They run over cliffs. Poor lemurs neva do nothing. Get plenny beeg maka, tho.

on December 19,2012 | 01:07PM

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loquaciousonewrote:

Going over the fiscal cliff this year is not a bad thing. Here is my reason. If Obama and Bonehead manage to agree to not disagree, Barry will be on the first plane to Hawaii and you know what that means to freeway users.